Open Innovation

Open innovation is the use of both internal and external knowledge to fuel innovation, and both internal and external paths to commercialize new products and business models. Within the scope of Open Innovators, we want to integrate the open innovation model (Chesbrough, Vanhaverbeke, West) with other, more user-oriented theories, like the idea of user-centric innovation (von Hippel) and the concept of crowdsourcing (Howe). The following paragraphs start by explaining the open innovation model.

- Intro: from closed to open innovation

Open Innovation Defined

Open Innovation assumes firms can and should use external ideas as well as internal ideas, and internal and external paths to market, as the firms look to advance their technology. Under open innovation, both external and internal ideas are used to create value, and internal mechanisms are defined to claim some portion of that value. Open innovation assumes that internal ideas can also be taken to market through external channels, outside the current businesses of the firm, to generate additional value. Ideas can also start outside the firm’s own labs and can move inside. Open innovation allows the recovery of overlooked innovations. Now there’s a greater chance the projects will find value in a new market or be combined with other projects, because everything is more open and flexible. According to Dr. Chesbrough, “Not all the smart people work for us. We need to work with smart people inside and outside the firm. External R&D can create significant value; internal R&D is needed to claim some portion of that value. We don’t have to originate the research to profit from it. Building a better business model is better than getting to market first. If we make the best use of internal and external ideas, we’ll win. We should profit from others’ use of our knowledge, and we should buy others’ knowledge whenever it advances our own business model.”

Some industries have been in open innovation mode for a long time. The Hollywood film industry, for example, has innovated for years through a network of partnerships and alliances among production studios, directors, talent agencies, actors and scriptwriters. Modern investment banking has been using external ideas as well, adopting the new, exotic investment instruments devised by newly minted PhD’s or finance professors. These different industries can be located on a continuum, one end of which includes industries in which entirely closed innovation prevails, the other end containing industries with fully open innovation conditions. Many industries are in transition between the two paradigms: automobiles, biotechnology, pharmaceuticals, healthcare, computers, software, communications, banking, insurance, and consumer packaged goods, even military weapons and communication systems are examples. The locus of innovation in these industries is moving beyond the confines of the central R&D laboratories of the largest companies to start-ups, universities and other outsiders. In so doing, the company can renew its current business and generate new business. For an innovative organization/company in a world of abundant knowledge, this can be the best of times.

Open Innovation, user-centric innovation, crowdsourcing…

Under Chesbrough’s definition, many different kinds of initiatives fall under the rubric of open innovation:

  • Scanning the external environment for ideas
  • Reaching out to a specialist on a contractor basis to solve a particularly vexing research problem
  • Forming a joint venture with other companies
  • Co-developing products with suppliers
  • Licensing technology
  • Forming alliances with universities and research institutes
  • Participating in broad networks to coordinate innovation activity (’creation nets’)
  • …

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